Released November 08, 2023 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Consumers' gain was natural gas producers' pain during the third-quarter, as sagging prices for natural gas dragged down earnings for four large U.S. independent gas-oriented drillers: EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas), Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas) and Antero Resources Corporation (NYSE:AR) (Denver, Colorado).
Henry Hub spot gas prices hovered in the $2.50-$3.00 per million British thermal units (MMBtu) range during the third quarter, down dramatically from year-earlier prices, when they peaked at nearly $10 per MMBtu. Demand rose in the just-completed quarter, mainly from electric generators and liquefied natural gas (LNG) exporters, but production rose even faster, leading to storage levels that were slightly higher than the five-year average and low prices heading into the traditional U.S. winter heating season.
Gas markets also have come way down from the peaks in the immediate aftermath of Russia's invasion of Ukraine in February 2022. Spot gas prices at Henry Hub, Louisiana, are expected to average about $2.61 per MMBtu for all of 2023, the U.S. Energy Information Administration (EIA) (Washington, D.C.) predicted in its October Short-Term Energy Outlook, released October 11. That's down significantly from 2022's full-year average spot price of $6.42 per MMBtu. But the agency expects full-year 2024 prices to rise appreciably, to about $3.23 per MMBtu.
Click on the image at right to see natural gas spot prices at Henry Hub, Louisiana, since late 2021.
"In a difficult price environment, low-cost producers will do better than their higher-cost peers," commented Gordon Gorrie, IIR's vice president of research for the Oil and Gas Production, Pipelines and Terminals industries. "Inflation and higher interest rates also are taking their toll on the financial results of independent producers."
Click on the image at right to see three years of third-quarter profits for all four companies.
Details for the four companies are below.
Range Resources
Range's emphasis on tightly managing costs helped it report better profitability than some of its peer independent drillers. The company earned $49 million on approximately $610 million of revenue for the July-September 2023 period. But that was a steep decline from the $373 million it earned on $1.1 billion of revenue for the comparable year-earlier quarter.
Commenting on third-quarter results, which were released October 24, CEO Dennis Degner said, "Third quarter results continued to showcase the resilience of Range's business. Range's competitive cost structure, low relative capital intensity, liquids optionality and thoughtful hedging allowed us to generate strong full-cycle margins despite challenged natural gas prices."
The company, which operates exclusively in the Appalachian Basin, which includes the Marcellus Shale, took a "maintenance" approach to production in the third quarter, he continued. Degner praised employees' strong operational execution, which enabled the company to drill longer laterals and record a consistent level of production, about 2.12 billion cubic feet of gas equivalent per day (Bcfe/d) in the just-completed period. Approximately 68% of the company's third-quarter production was natural gas.
The Range CEO said the company remains "focused on efficiently developing our Marcellus assets to create value for shareholders into what we expect is an improving macroeconomic outlook for natural gas and natural gas liquids."
Range's adroit hedging program allowed it to book a 54-cent-per-MMBtu premium over prices at the New York Mercantile Exchange (NYMEX) (New York, New York), the company said October 24.
About 78% of Range's third-quarter earnings--about $38 million--came from a mark-to-market derivative gain due to decreases in commodity prices.
Overall, the company's cash operating cost per million cubic foot of gas equivalent (MMcfe) fell 13% compared to year-earlier costs: to $1.86 per MMcfe in the just-completed period from $2.15 in the third quarter of 2022. Including depletion, depreciation and amortization (DD&A), the company's all-in third quarter costs per MMcfe fell 12%, to $2.31 per MMcfe from a year-earlier level of $2.61.
Year-to-date capital spending through third quarter was about $478 million, which was about 80% of Range's capital budget for 2023. Range did not repurchase any shares during the third quarter, nor did it change its dividend.
EQT
In its October 24 earnings statement, EQT emphasized that it closed the strategic acquisitions of Tug Hill (Fort Worth, Texas) and XcL Midstream (Canonsburg, Pennsylvania) during the third quarter, and that integration of the acquired companies was "ahead of schedule and progressing at record pace as compared to prior integrations."
The company added that it has already achieved about 40% drilling and completion efficiency improvements versus legacy Tug Hill performance after only operating those assets for two months. Further cost savings are possible, it added.
It's understandable that EQT would highlight positive operating news, as financial results nosedived, plummeting $606 million from the year-earlier quarter. The company reported net earnings of $61 million on $1.2 billion of revenue for the just-completed period versus earnings of $687 million of profits on about $2.1 billion of revenue for the third quarter of last year.
Earnings for the most recent period included a $178 million gain on derivatives. By comparison, derivatives dragged down earnings by $1.6 billion for the year-earlier third quarter.
President and CEO Toby Z. Rice said the just-completed period "saw a multitude of positive highlights and new records achieved at EQT ... highlighting the power of our proprietary digital platform and continued refinements made to our integration playbook."
The Pittsburgh-based driller also signed two large firm sales agreements covering all 1.2 billion cubic feet of gas per day (Bcf/d) of transportation capacity on EQT's Mountain Valley Pipeline capacity, locking in what it termed "long-term premium pricing."
EQT raised its dividend 5% during the quarter. However, increased capital costs during the quarter pushed free cash flow into the red, a negative $2 million for the period. In the comparable year-earlier quarter, EQT reported about $591 million in free cash flow, which is not a generally accepted accounting principle (GAAP) measure.
The acquisition of Tug Hill, a producer, helped boost EQT's quarterly production volumes 35%, to about 523 billion cubic feet of gas equivalent (Bcfe) for the most recent July-September period versus about 488 Bcfe for the July-September 2022 period. Natural gas accounts for most of EQT's production. But it received far less for its gas in the just-completed period: to about $2.68 per million cubic feet (Mcf), down sharply from $8.62 per Mcf for the comparable year-earlier period.
Antero Resources
The Denver-based independent driller reported $18 million in earnings on $1.1 billion of revenue for the just-completed three-month period. By contrast, in the year-earlier quarter, Antero earned $560 million on $2.1 billion of revenue.
Like their peer independent drillers, Antero executives chose to highlight upbeat operational results rather that dwell on plummeting profits caused by sharply lower gas prices.
In the company's quarterly earnings report, issued October 23, Paul Rady, chairman, chief executive and president, commented, "Our third quarter results continue to benefit from the operating momentum that we have built throughout this year. During the first nine months of 2023 both our drilling and completion teams set numerous Company records. This operational excellence combined with stellar well performance has led to quarterly production volumes above expectations."
Those factors caused the company to increase its full-year 2023 production guidance 7%, or about 225 MMcfe/d, to between 3.39 Bcfe/d to 3.41 Bcfe/d, without increasing capital outlays. The driller produced about 3.5 Bcfe/d in the third quarter, up 4% from the comparable year-earlier quarter.
Voicing the traditional optimism that characterizes life in the oil and gas industry, the Antero chief added: "On the macro front, we see natural gas storage levels normalizing on the back of record natural gas power burn, strong LNG exports and U.S. natural gas exported through pipelines to Mexico. At the same time, we anticipate that U.S. production growth will be limited in the coming months following the dramatic decrease in drilling rigs. We believe this strong fundamental backdrop will support and strengthen the forward natural gas curve."
In other words, he sees better days ahead.
Coterra Energy
Houston-based Coterra earned $323 million on about $1.4 billion in revenue in the third quarter of 2023, down sharply from the $1.2 billion it earned on $2.5 billion of revenue in the comparable year-earlier third quarter.
Faster cycle times and strong well productivity enabled the company, which reported earnings November 6, to beat quarterly production targets and raise full-year production goals. Natural gas production averaged 2.9 billion cubic feet per day (Bcf/d), a gain over the 2.8 Bcf/d it produced in the third quarter of 2022. Oil production and natural gas liquids (NGL) production volume also exceeded last year's third-quarter production. The company operates in the Marcellus Shale, Permian Basin and Anadarko Basin, Most of its gas production comes from the Marcellus while most of its crude oil is extracted from the Permian.
But like its peers, the prices Coterra received for its gas, oil and NGLs slid meaningfully from the year earlier quarter and offset the impact of an increase in production. Including hedges, gas fetched $2.01 per Mcf in the just-completed period, down from $5.58 for the comparable year-earlier period. Oil prices fell $8 per barrel year-over-year while NGLs brought in about $20 per barrel, down from approximately $33 per barrel in the year-earlier three-month period.
The company said it was "on track to well exceed shareholder return threshold of 50% of Free Cash Flow (a non-GAAP measure) for the year."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Henry Hub spot gas prices hovered in the $2.50-$3.00 per million British thermal units (MMBtu) range during the third quarter, down dramatically from year-earlier prices, when they peaked at nearly $10 per MMBtu. Demand rose in the just-completed quarter, mainly from electric generators and liquefied natural gas (LNG) exporters, but production rose even faster, leading to storage levels that were slightly higher than the five-year average and low prices heading into the traditional U.S. winter heating season.
Gas markets also have come way down from the peaks in the immediate aftermath of Russia's invasion of Ukraine in February 2022. Spot gas prices at Henry Hub, Louisiana, are expected to average about $2.61 per MMBtu for all of 2023, the U.S. Energy Information Administration (EIA) (Washington, D.C.) predicted in its October Short-Term Energy Outlook, released October 11. That's down significantly from 2022's full-year average spot price of $6.42 per MMBtu. But the agency expects full-year 2024 prices to rise appreciably, to about $3.23 per MMBtu.
Click on the image at right to see natural gas spot prices at Henry Hub, Louisiana, since late 2021. "In a difficult price environment, low-cost producers will do better than their higher-cost peers," commented Gordon Gorrie, IIR's vice president of research for the Oil and Gas Production, Pipelines and Terminals industries. "Inflation and higher interest rates also are taking their toll on the financial results of independent producers."
Click on the image at right to see three years of third-quarter profits for all four companies.Details for the four companies are below.
Range Resources
Range's emphasis on tightly managing costs helped it report better profitability than some of its peer independent drillers. The company earned $49 million on approximately $610 million of revenue for the July-September 2023 period. But that was a steep decline from the $373 million it earned on $1.1 billion of revenue for the comparable year-earlier quarter.
Commenting on third-quarter results, which were released October 24, CEO Dennis Degner said, "Third quarter results continued to showcase the resilience of Range's business. Range's competitive cost structure, low relative capital intensity, liquids optionality and thoughtful hedging allowed us to generate strong full-cycle margins despite challenged natural gas prices."
The company, which operates exclusively in the Appalachian Basin, which includes the Marcellus Shale, took a "maintenance" approach to production in the third quarter, he continued. Degner praised employees' strong operational execution, which enabled the company to drill longer laterals and record a consistent level of production, about 2.12 billion cubic feet of gas equivalent per day (Bcfe/d) in the just-completed period. Approximately 68% of the company's third-quarter production was natural gas.
The Range CEO said the company remains "focused on efficiently developing our Marcellus assets to create value for shareholders into what we expect is an improving macroeconomic outlook for natural gas and natural gas liquids."
Range's adroit hedging program allowed it to book a 54-cent-per-MMBtu premium over prices at the New York Mercantile Exchange (NYMEX) (New York, New York), the company said October 24.
About 78% of Range's third-quarter earnings--about $38 million--came from a mark-to-market derivative gain due to decreases in commodity prices.
Overall, the company's cash operating cost per million cubic foot of gas equivalent (MMcfe) fell 13% compared to year-earlier costs: to $1.86 per MMcfe in the just-completed period from $2.15 in the third quarter of 2022. Including depletion, depreciation and amortization (DD&A), the company's all-in third quarter costs per MMcfe fell 12%, to $2.31 per MMcfe from a year-earlier level of $2.61.
Year-to-date capital spending through third quarter was about $478 million, which was about 80% of Range's capital budget for 2023. Range did not repurchase any shares during the third quarter, nor did it change its dividend.
EQT
In its October 24 earnings statement, EQT emphasized that it closed the strategic acquisitions of Tug Hill (Fort Worth, Texas) and XcL Midstream (Canonsburg, Pennsylvania) during the third quarter, and that integration of the acquired companies was "ahead of schedule and progressing at record pace as compared to prior integrations."
The company added that it has already achieved about 40% drilling and completion efficiency improvements versus legacy Tug Hill performance after only operating those assets for two months. Further cost savings are possible, it added.
It's understandable that EQT would highlight positive operating news, as financial results nosedived, plummeting $606 million from the year-earlier quarter. The company reported net earnings of $61 million on $1.2 billion of revenue for the just-completed period versus earnings of $687 million of profits on about $2.1 billion of revenue for the third quarter of last year.
Earnings for the most recent period included a $178 million gain on derivatives. By comparison, derivatives dragged down earnings by $1.6 billion for the year-earlier third quarter.
President and CEO Toby Z. Rice said the just-completed period "saw a multitude of positive highlights and new records achieved at EQT ... highlighting the power of our proprietary digital platform and continued refinements made to our integration playbook."
The Pittsburgh-based driller also signed two large firm sales agreements covering all 1.2 billion cubic feet of gas per day (Bcf/d) of transportation capacity on EQT's Mountain Valley Pipeline capacity, locking in what it termed "long-term premium pricing."
EQT raised its dividend 5% during the quarter. However, increased capital costs during the quarter pushed free cash flow into the red, a negative $2 million for the period. In the comparable year-earlier quarter, EQT reported about $591 million in free cash flow, which is not a generally accepted accounting principle (GAAP) measure.
The acquisition of Tug Hill, a producer, helped boost EQT's quarterly production volumes 35%, to about 523 billion cubic feet of gas equivalent (Bcfe) for the most recent July-September period versus about 488 Bcfe for the July-September 2022 period. Natural gas accounts for most of EQT's production. But it received far less for its gas in the just-completed period: to about $2.68 per million cubic feet (Mcf), down sharply from $8.62 per Mcf for the comparable year-earlier period.
Antero Resources
The Denver-based independent driller reported $18 million in earnings on $1.1 billion of revenue for the just-completed three-month period. By contrast, in the year-earlier quarter, Antero earned $560 million on $2.1 billion of revenue.
Like their peer independent drillers, Antero executives chose to highlight upbeat operational results rather that dwell on plummeting profits caused by sharply lower gas prices.
In the company's quarterly earnings report, issued October 23, Paul Rady, chairman, chief executive and president, commented, "Our third quarter results continue to benefit from the operating momentum that we have built throughout this year. During the first nine months of 2023 both our drilling and completion teams set numerous Company records. This operational excellence combined with stellar well performance has led to quarterly production volumes above expectations."
Those factors caused the company to increase its full-year 2023 production guidance 7%, or about 225 MMcfe/d, to between 3.39 Bcfe/d to 3.41 Bcfe/d, without increasing capital outlays. The driller produced about 3.5 Bcfe/d in the third quarter, up 4% from the comparable year-earlier quarter.
Voicing the traditional optimism that characterizes life in the oil and gas industry, the Antero chief added: "On the macro front, we see natural gas storage levels normalizing on the back of record natural gas power burn, strong LNG exports and U.S. natural gas exported through pipelines to Mexico. At the same time, we anticipate that U.S. production growth will be limited in the coming months following the dramatic decrease in drilling rigs. We believe this strong fundamental backdrop will support and strengthen the forward natural gas curve."
In other words, he sees better days ahead.
Coterra Energy
Houston-based Coterra earned $323 million on about $1.4 billion in revenue in the third quarter of 2023, down sharply from the $1.2 billion it earned on $2.5 billion of revenue in the comparable year-earlier third quarter.
Faster cycle times and strong well productivity enabled the company, which reported earnings November 6, to beat quarterly production targets and raise full-year production goals. Natural gas production averaged 2.9 billion cubic feet per day (Bcf/d), a gain over the 2.8 Bcf/d it produced in the third quarter of 2022. Oil production and natural gas liquids (NGL) production volume also exceeded last year's third-quarter production. The company operates in the Marcellus Shale, Permian Basin and Anadarko Basin, Most of its gas production comes from the Marcellus while most of its crude oil is extracted from the Permian.
But like its peers, the prices Coterra received for its gas, oil and NGLs slid meaningfully from the year earlier quarter and offset the impact of an increase in production. Including hedges, gas fetched $2.01 per Mcf in the just-completed period, down from $5.58 for the comparable year-earlier period. Oil prices fell $8 per barrel year-over-year while NGLs brought in about $20 per barrel, down from approximately $33 per barrel in the year-earlier three-month period.
The company said it was "on track to well exceed shareholder return threshold of 50% of Free Cash Flow (a non-GAAP measure) for the year."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
